The Heartbreak of MLM

Golden Gate Bridge

Chris at the Golden Gate Bridge

There are so many great things about MLM, multi-level marketing, or network marketing, whatever you would like to call it. Network marketing is actually a slightly different term as it implies making money by networking with other people. Multi-level marketing usually refers to a compensation plan. A comp plan is how the MLM company determines what to pay you. Like playing in a casino, the house never loses money. They know how much of the revenue is theirs and how much is the distributor’s. So the comp plan never pays out more than the total margin of a product, margin being the retail price over cost.

Let us go over what is good and bad about multi-level marketing compensation plans. Here is a partial list of what is good about them:

1. They allow you to help people without neglecting your business

2. In time, compensation becomes residual income. In other words, the work you do today is paid out over the coming years.

3. With residual income, you can take vacations or time off without fear that your job will be gone when you return, or that your business cannot run without you. If you are just selling the product, any time away is a problem.

How about some bad things? There has to be something wrong with MLM comp plans right? Here are some that are partially true:

1. You may not make as much initially as you would if you earned the entire commission on the product. On the flip side, you would probably have to be selling significant volume to earn the lion’s share of commissions. If you are selling in volume, you would also make the majority of commissions in an MLM plan.

2. Having too much invested in a single company can be problematic. However, some MLM companies are good long-term partners.

3. Some MLM companies require large monthly purchases. True, but most require no purchase. However, to earn your downline commissions there often is a minor purchase required (as little as $100 retail monthly).

4. Many companies require you to do distasteful selling or attend meetings, sometimes in locations you must travel to. I have heard this, but most MLM companies do not require you to attend meetings or sell in weird ways. Most meetings today can be held by telephone. Training usually exists online and upline leaders are a telephone call away.

5. MLM companies require you to sign-up friends and family. We have found that “warm market” sponsoring works in some cases, but for the most part promoting the business and letting people call if interested works just fine. If somebody buys a lot from you, you can also encourage them to become a distributor for the discount.

Multi-level marketing is a good place to go for long-term moderate income. If you are looking for income in the billions, it is not the right place for you. But if you are looking for a few hundred to a few thousand dollars per month, it is perfect. Not that all distributors are this successful, but some are.

I have to say that I have seen people spend a lot of money doing unproductive things in MLM. I have also seen people give up way too early. I try to encourage people to do the right things but sometimes it does not work out. That is what breaks my heart.

It does make me feel better to see people become wildly successful.

Leave a Reply